The Pomp Letter

Today’s letter is brought to you by Bitcoin Investor Day!

I am hosting the first Bitcoin Investor Day in New York City on March 22nd this year. It is an annual meeting for sophisticated Wall Street investors who are interested in bitcoin.

Speakers include Cathie Wood, Mike Novogratz, Anthony Scaramucci, Mark Yusko, Head of Digital Assets at BlackRock, Bitwise CEO, Head of Research at Fidelity & VanEck, and many more.

Tickets are only $50 and the venue is incredible. This will be one of the highest quality bitcoin conferences of the year. See you there!

To investors,

Bitcoin hit a new all-time high of $72,000 this morning. As Balaji Srinivasan highlighted, the digital currency has now hit a new all-time high in every currency in the world.

In many recent conversations, investors from the traditional finance industry have asked me “what is the value of bitcoin today?” They are specifically referring to the difference between price and value. One way to think about this is through bitcoin energy value. As Capriole Fund’s Charles Edwards points out, bitcoin’s energy value currently sits at approximately $81,000.

Regardless of the true value of bitcoin, the price has been acting in a different way than past market cycles. Bitcoin analyst Alex Adler Jr explains the risk of correction in this bull cycle by saying, “the average drawdown [in this cycle] is -5.47%, and the maximum is -19.11%. Compare this with past cycles and the all-time average drawdown of -15.18% to make informed decisions about your investments.”

Adler also shows “starting from October 2023, the volumes of daily transactions show growth, with the peak occurring on March 5 with a volume of $111 billion. The figure is simply huge, as some island nations have a smaller annual GDP.”

It is unprecedented for bitcoin to reach new all-time high prices before the halving. Given that we are less than 50 days away from that supply shock, it is hard to construct a bearish narrative through the end of 2024.

We can see that two events over the last year led to bitcoin’s rise and my guess is that the halving will be the third event on this chart in hindsight.

The spot bitcoin ETFs are still buying hundreds of millions of dollars of bitcoin per day. Microstrategy is pouring in hundreds of millions of dollars every few weeks. Most of the distribution platforms, such as Morgan Stanley, have not been turned on yet, but rumors are they have been racing to make the asset available to their clients.

And President Trump said on CNBC this morning that bitcoin has too many use cases now, so he would find it difficult to ban.

The funny thing about bitcoin is that it is immune to the noise. The network continues to produce block-after-block of transactions, regardless of what is happening in the world. Bitcoin didn’t care when the price was crashing and the bears were dancing on graves. Bitcoin doesn’t care today when price is surging and the world feels under-allocated to the asset.

Hard money is eating the world. Investors are realizing that they need the asset in order to be prepared for an uncertain future. Eventually everyone comes to the same conclusion.

Hope you have a great start to your week. I’ll talk to you tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

John Egan is the Head of Crypto at Stripe.

In this conversation, we talk about the crypto industry and how Stripe is interfacing with the technology, what they have been building, how their products work, bridging the gap between Web2 and Web3, stablecoins, and more.

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How Stripe Is Building For Bitcoin & Crypto

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Liza Lin wrote a story in the Wall Street Journal this morning titled “China Intensifies Push to ‘Delete America’ From Its Technology.” It clearly articulates a renewed effort by China to reduce their dependency on American technology companies, including hardware and software producers.

Lin writes:

“The 2022 Chinese government directive expands a drive that is muscling U.S. technology out of the country—an effort some refer to as “Delete A,” for Delete America.  

Document 79 was so sensitive that high-ranking officials and executives were only shown the order and weren’t allowed to make copies, people familiar with the matter said. It requires state-owned companies in finance, energy and other sectors to replace foreign software in their IT systems by 2027. 

American tech giants had long thrived in China as they hot-wired the country’s meteoric industrial rise with computers, operating systems and software. Chinese leaders want to sever that relationship, driven by a push for self-sufficiency and concerns over the country’s long-term security.

The first targets were hardware makers. Dell, International Business Machines and Cisco Systems have gradually seen much of their equipment replaced by products from Chinese competitors. 

Document 79, named for the numbering on the paper, targets companies that provide the software—enabling daily business operations from basic office tools to supply-chain management. The likes of Microsoft and Oracle are losing ground in the field, one of the last bastions of foreign tech profitability in the country.

The effort is just one salvo in a yearslong push by Chinese leader Xi Jinping for self-sufficiency in everything from critical technology such as semiconductors and fighter jets to the production of grain and oilseeds. The broader strategy is to make China less dependent on the West for food, raw materials and energy, and instead focus on domestic supply chains.”

If you ignore which countries are involved and merely evaluate this strategy on merit for a nation state, it makes a lot of sense.

Reducing dependency on foreign countries and international supply chains makes your country more resilient. Driving innovation and focusing on domestic manufacturing creates jobs, while simultaneously creating GDP growth. Lastly, a vertically-integrated nation state has less security vulnerabilities to worry about.

For some reason, the American economy and our politicians have a harder time pursuing this strategy than China. There is no guarantee that China will be successful, but at least they are trying.

Imagine if you read the following:

“The effort is just one salvo in a yearslong push by the American President for self-sufficiency in everything from critical technology such as semiconductors and fighter jets to the production of grain and oilseeds. The broader strategy is to make America less dependent on the East for food, raw materials and energy, and instead focus on domestic supply chains.”

That description would be incredibly bullish for the future of America. Unfortunately, it is not true at the moment.

One other idea came to mind as I read the article this morning — decentralization. Given the rise of blockchain technology, combined with an ever-increasing popularity of open source software, it would not be surprising to see more country-agnostic technology.

Bitcoin is a solid example. It is not possible for a country to fight bitcoin on the premise that their citizens should not adopt another nation’s currency. Bitcoin has no nation. It is not American or Chinese. The digital currency simply exists in a global economy and can be used by anyone for their desired purpose.

There are not many technologies that fit this description today, but my expectation is that many more will reach global adoption as geopolitical tensions continue to rise between the largest economies in the world. Politicians and militaries care about countries of origin. The end user just wants to use technology that solves their problem.

The natural answer will be decentralized, open-source technology. It will be interesting to see what major products are next to seize the opportunity.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Anthony Pompliano records a solo episode explaining what is going on in the bitcoin market, historical context, analysis of where we currently are, macro environment, and where we are headed.

Listen on iTunes: Click here

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Bitcoin Update: All-Time High and Where We Are Headed

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Bitcoin Investor Day!

I am hosting the first Bitcoin Investor Day in New York City on March 22nd this year. It is an annual meeting for sophisticated Wall Street investors who are interested in bitcoin.

Speakers include Cathie Wood, Mike Novogratz, Anthony Scaramucci, Mark Yusko, Head of Digital Assets at BlackRock, Bitwise CEO, Head of Research at Fidelity & VanEck, and many more.

Tickets are only $50 and the venue is incredible. This will be one of the highest quality bitcoin conferences of the year. See you there!

To investors,

Bitcoin briefly broke the previous all-time high of $69,000 yesterday. The digital currency then proceeded to drop more than 10% shortly after. This type of volatility is unheard of in traditional financial markets, but it is just a normal day in the world of cryptocurrencies.

Alex Thorn, the Head of Research at Galaxy Digital, correctly pointed out it is important to “remember that in December 2020, BTC touched its prior all-time high of ~$20k twice, then ranged and traded -11.3% lower over 15 days before definitively breaking ATH.

It is likely to look similar here, and some consolidation would be healthy after +62% YTD / +77% from YTD low (jan 23).”

Thorn went on to present an analysis of the volatility in the last two bull markets. First, he showed “bitcoin had 13 corrections of 10% or more between the March 12, 2020 covid-low ($3858) and the April 14, 2021 ATH ($64,899).”

If we go back to the 2017 bull market, “from January 1, 2017 to December 17, 2017 bitcoin ATH ($19,891) there were thirteen 12%+ drawdowns (of those, 12 were 15%+, and 8 were 25%+).”

Bitcoin is volatile. You need the volatility to get the upwards movement in price, so most holders view the thrashing of price to be a net positive over the long run. Now that bitcoin is larger than the entire US high-yield bond market, or larger than the entire silver market, some believed the volatility would subside.

Personally, I have even talked about volatility dampening over the long-run.

But bitcoin has not paid attention to those opinions in the short-term. The asset continues to oscillate in ranges of thousands of dollars per day. This is important to understand if you are buying bitcoin for the first time or if you have a weak stomach for volatility.

The good news is that “Bitcoin is not only the best performing asset class of 2024, up 62% YTD, it also has the highest Sharpe ratio at 2.1,” according to Zerohedge. This continues to reinforce the point that bitcoin is one of the best, if not the best, risk-return assets available in the market.

I write this to all of you because the market continues to be a little crazy. At the exact moment that the euphoria hits from breaking the all-time high, holders are immediately met with a 10% drawdown. It is easy for outsiders to say bitcoin holders “got lucky,” but the truth is that very few people in the world can hold an asset through this type of volatility.

I hope this helps as we go through the next few weeks. Talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Mauricio Tovar is the Co-Founder at Tropykus.com and CEO at TRUWeb3. Tropykus Fiance offers simple digital loan and credit products focused on emerging economies.

In this conversation, we talk about bitcoin in Latin America, governments and leaders, benefits, risks, stablecoins, DeFi, Web3, and what the future may look like.

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New Bitcoin All-Time High Leads To Price Doubling Quickly

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Bitcoin almost broke the previous all-time high of $69,000 yesterday. It came within $500 and has since retreated from the milestone. Given the persistent demand for the digital currency, and the lack of new production in response to this increased demand, we should assume that bitcoin will hit a new all-time high price in the next few days.

This leads to the question “what happens when bitcoin hits a new all-time high?”

Analyst Dylan LeClair points out that bitcoin’s price has doubled very quickly each time it has eclipsed the old all-time high.

This is hard to fathom, but bitcoin’s price doubled in 18 days or less in 3 of the 4 times that the asset hit a new all-time high. This is what it looks like when people talk about “price discovery.”

The world is trying to figure out what bitcoin is worth. It has determined that the 2022 valuation of $17,000 is wrong. Where the asset price will go, no one knows.

We shouldn’t discount the past though. Bitcoin’s price is up 20% in the last week. It is up 60% in the last month. And the asset is up 200% in the last year. These are big numbers for any financial asset, but especially a controversial one that has been heavily debated publicly for 10+ years.

We can’t evaluate bitcoin’s future solely on price. The past performance around all-time highs can serve as a guide, but we have to remember that the bitcoin halving is less than 50 days away. As this event occurs, I anticipate that there will be just as much, if not more, demand for bitcoin.

This means that the demand will outstrip available incoming supply by at least 20:1. That ratio is unprecedented in global finance for any period of sustained time. We have seen 10-12x more demand than what the network is producing for the last 2 months.

So the idea of that imbalance increasing in favor of bitcoin holders, and continuing to do so for many more months, would likely create a rapid appreciation in price.

Lastly, BlackRock filed regulatory paperwork yesterday to get clearance to put some of the funds from their Strategic Income Opportunities Fund into a bitcoin ETF. That fund, which is a $36 billion conservative bond fund, signals a potential new source of capital inflows into bitcoin — trillions of dollars of existing funds that need to find a home in an asset that performs better than the current asset allocation.

As I said on CNBC this morning, it is hard to construct an argument that is not bullish for bitcoin in the short-to-medium term. Obviously, I don’t understand the future any better than anyone else. I am merely looking at the data and trying to figure out the probabilities of various outcomes coming to fruition.

You can watch the full segment here:

The data is overwhelmingly telling us that bitcoin has a bright future ahead of itself.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Darius Dale is the Founder & CEO of 42Macro.

In this conversation, we look at their Weather Model and what it is telling us about stocks, bonds, bitcoin, we also talk about global liquidity, inflation, and impact of politics on financial markets.

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Bitcoin Continues To Look Bullish Against Macro Backdrop

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* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

There is something special happening in the bitcoin market right now. It feels like the global financial world has started to understand what the asset is and why it is important for them to own it.

We are not talking about small retail investors or family offices, but rather large institutions who want to invest hundreds of millions or billions of dollars to bitcoin.

There was $576 million of net inflow yesterday to the bitcoin spot ETFs according to BitMex Research.

Investors put $520 million into Blackrock’s IBIT fund alone. These are incredibly large numbers. But inflows are not the only area where you can see the demand from Wall Street.

Jim Bianco created this chart to show the number of individual trades in the bitcoin ETFs compared to SPY or QQQ.

Eric Balchunas pointed out “there were more individual trades yesterday in the bitcoin ETFs than there were in SPY or QQQ. And this is before they have options and/or are available on many advisory platforms.”

That is wild.

Why are so many people buying bitcoin? As I mentioned in yesterday’s letter, the risk of inflation is looming on the horizon. Bloomberg’s Lisa Abramowicz quantified this when she said “traders are betting on substantially stickier inflation in the US for the next few years. Breakeven rates on 2-year notes are current at 2.75%, the highest level in almost a year.”

There are not many places to hide in public markets if you think inflation is coming to make a serious comeback.

The increase in demand for bitcoin has created a reflexive response. The higher the price goes, the more interest there is in the asset. Balaji Srinivasan highlights “bitcoin has passed all-time highs in 30+ countries, including China and India.”

When price runs aggressively as it is doing right now, many people tell themselves that they will wait for a pullback. It makes them feel better if they can buy bitcoin at a price that they previously saw it trading for. The problem is that it can be nearly impossible to time a volatile market.

According to Fundstrat’s Tom Lee, if you miss the 10 best days of Bitcoins return each year, you miss majority of the return. The ultimate example of “time in the market is more important than timing the market.”

Humans are not built to time markets. Our fear and greed emotions get the best of us.

My thought process has always been to let the best performing asset over the last 15 years continue to do its thing. It will go up, it will go down, and it will go sideways. But over a long enough time period, bitcoin seems to go up because it serves as an index for global liquidity.

And the governments can’t help themselves — they’ll continue to print money, manipulate interest rates towards zero, and make sure there is liquidity is sloshing around forever.

Hope you have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Alex Tapscott is the author of a new book, "Web3: Charting the Internet's Next Economic and Cultural Frontier." Alex has been in the bitcoin and crypto industry for a long time.

In this conversation, we talk about the current adoption of bitcoin, AR/VR, NFTs, metaverse, Web3, regulation, and how artificial intelligence plays into all of this.

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OG Bitcoiner Explains What He Is Excited About Now

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* Base - Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub - Your data-driven gateway to the US housing market.

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You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Today’s letter is brought to you by Crypto Academy!

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To investors,

Bitcoin went vertical yesterday. The digital currency is up more than 11.5% in the last 24 hours. This type of performance is rare in financial markets, especially if there is no obvious catalyst such as an earnings announcement or M&A activity.

So why is bitcoin rapidly appreciating over the last few weeks?

The common answer is that the bitcoin spot ETFs have led to significant demand for the asset. This answer is not wrong. Yesterday we saw $520 million in net inflows to the ETFs.

As the folks at Bitmex Research pointed out, that is 9,510 bitcoin of net inflows when you price the capital flow in bitcoin. To put it in perspective, the bitcoin network is producing 900 net new bitcoin per day. So there is more than 10x demand for bitcoin than what the network can produce daily.

That imbalance of supply and demand would not be shocking if we were evaluating it during the first few days of the ETF launch. But we are now 45 days after the ETF launch, so the 10x demand imbalance is mind-boggling.

The ETFs have also officially crossed over $6 billion in cumulative net inflows since launch. Blackrock’s fund has $7.2 billion in assets as the leader and there are 5 ETFs with at least $1 billion in AUM. The launch of the bitcoin spot ETFs have been the single greatest launch of any ETF in history by almost every measurement.

This brings us to the most important question — why are so many people buying bitcoin right now?

The easy answer would be some version of “the institutions want to make money and now that they can buy the best performing asset of the last 15 years, they are going to buy as much as they can.” There is some truth in that statement, but I don’t think it is the full story.

In fact, there is a hidden detail that most people are missing, which may scare the hell out of you.

What if people are buying bitcoin because we are going to see a resurgence of inflation and investors are preparing for the inflation shock to their portfolio?

Let me explain.

First, let’s go back to 2020. The pandemic had a chokehold on the economy. Government officials and central bankers stepped in with unprecedented monetary and fiscal stimulus. Trillions of dollars in liquidity was sloshing around the economy.

The state talking point was to not worry about inflation, which was later followed by “inflation is transitory.” Sophisticated investors were not fooled though. Paul Tudor Jones and Stanley Druckenmiller went on CNBC to say “inflation is coming!” They each said they were buying bitcoin because the belief was that inflation would be the fastest horse in the inflation-hedge category.

That was a correct prediction.

Bitcoin’s price was around $8,000 during the summer of 2020 and inflation was under 2%. By March 2021, less than 1 year later, bitcoin was trading at $64,000. That 8x increase in price was attributable to a few things, but a major reason was that markets are forward-looking.

Investors saw that inflation was coming, so they began buying bitcoin hand-over-fist. They wanted to be protected when the inflation arrived. Remember, investors don’t wait for inflation to come before buying inflation-hedge assets. They buy them in anticipation.

And there is a strong argument that investors are doing it again now.

The Fed has worked tirelessly to get inflation down. The media has celebrated that year-over-year CPI continues to fall aggressively. But that is not an honest evaluation of the situation.

According to Winfield Smart, “Inflation resurfacing is a real risk today. ISM services prices has been an accurate leading indicator for inflation. And it has just moved up sharply.”

Most importantly Brent Donnelly points out, companies are still looking to raise their prices. This is the ultimate measure of future inflation — if companies continue to raise their prices then it won’t matter what the Fed is doing.

So the risk of inflation coming back is getting higher each day. Some investors are buying bitcoin in anticipation of that situation coming to fruition. The new investment vehicle presented via ETFs gives more capital the option to use this asset than at any other time in history.

As this capital flows in, the numerous investors who were short bitcoin are being liquidated. Bitcoin analyst Checkmate explained by saying, “You know what sets this rally apart from the last time bitcoin hit $57,000 in 2021? This time, short-sellers continue to bet against the prevailing uptrend, getting liquidated as a result. At true bull market peaks, it is the levered longs that get wiped out. Right now, its the shorts.”

This is reflexivity at it’s finest. The market begins to chase the asset that is running away from them. The smart investors kick off the trend, but the followers push everything further and faster than previously thought possible.

Will Clemente wrote yesterday, “Anyone that’s bought a Bitcoin ETF is now up at least 15%, as it trades just 25% away from price discovery. Any suit waiting to see whether the ETFs would have impact will soon become momentum buyers. Then all time high breakout buyers will follow. Reflexivity.”

I couldn’t agree more.

The bitcoin ETFs are getting most of the attention because the capital inflows are quantifiable. They have exceeded all expectations. It is fun to watch Wall Street push the price of bitcoin up in order to get bitcoin holders to sell their coins.

But don’t buy the narrative that this rally is only tied to some speculative interest from large capital allocators. There is a big risk of inflation lurking in the dark corners of the economy. Many investors have seen this story before and they are not going to be fooled twice.

Inflation. ETFs. Media attention. Liquidated shorts. Reflexivity.

Satoshi couldn’t have drawn it up any better.

Have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Nate Fischer is the Founder of New Founding and American Reformer.

In this conversation, we talk about economics, geopolitics, where the world is headed, why he owns an ammunition company, breakdown of globalization and how that could occur, allocating capital, and much more.

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The Shocking Future of Bitcoin, Economy, Government & Geopolitics

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* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Base - Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

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To investors,

The US government is already paying more than $1 trillion in annual interest payments on the national debt. That is a mind-boggling number that is set to get much worse in the coming year if something doesn’t change quickly.

The debt servicing cost of national debt around the world has been steadily rising in recent years. Smaller, low-income countries are suffering more than large countries, but no country has been immune to the problem.

Countries had to take on significantly more debt to deal with the pandemic and various secondary issues. That debt came at a time of low-interest rates, but now that interest rates are rising, and many countries have not stopped borrowing, the servicing costs will continue to grow rapidly.

The United States is a good example of the trouble ahead. More than 30% of all US federal debt is set to roll over in 2024, which is over $7.5 trillion.

This is problematic because the refinancing cost of this debt is the worst it has been in more than two decades. The average interest rate on each global bond that rolls over will increase by more than 100 basis points.

Thankfully, there was relief on the way at the start of this year. The market believed the Federal Reserve would cut interest rates and the refinancing costs of some of the debt would drop simultaneously.

The market believes that story less today than it did just 7 weeks ago.

Jim Bianco explains with this chart and overview:

“Here are the probabilities of the first Fed cut over the next four FOMC meetings.

* The next FOMC meeting is on March 20 (brown). The market is pricing just a 3% probability of a cut. This was nearly 90% at the beginning of the year.

* The May 1 FOMC (green) is down to 24%. Being well below 50%, it is unlikely this meeting will see a cut. Right before the January Payroll report (massive beat of 353k), the pricing had a 95% probability of a cut in May.

* The June 12 FOMC (blue) has a 65.54% probability that the Fed will cut at this meeting, so a cut is still priced in (above 50%). However, this was 100% the day before the beat in the January payroll report and 92% the day before the beat (more than expected) in January CPI.

* The July 31 FOMC meeting (red) has an 85% probability of a cut. But note this was 98% the day before the January CPI report (February 12).

In other words, all the probabilities are in a downtrend. So, while March and May are priced out, check back after February payrolls and CPI to see where all these probabilities are. If payrolls and CPI are again strong (above consensus), I would look for June and July cuts to get priced out.” - Jim Bianco

This is an important point from Bianco because the relief that was on the way seems to be quietly walking out the back door of the party. The US will continue to have higher interest payments on the debt until the Fed can cut rates. The Fed can’t cut rates until they are sure that inflation won’t come roaring back.

According to Molly Smith and Craig Stirling at Bloomberg:

“Underlying US inflation probably rose in January by the most in a year, as tracked by the Federal Reserve’s preferred metric, highlighting the long and bumpy path to taming price pressures.

The core personal consumption expenditures price index, which excludes food and energy costs, is seen rising 0.4% from a month earlier. That would mark the second straight monthly acceleration in a gauge that’s largely been receding over the past two years.”

The Fed is officially in a lose-lose situation. Keep interest rates high and you will probably push the US economy into a recession. Cut interest rates and risk inflation coming back to ruin your legacy.

There are no winners in an inflation fight.

And while this is going on, the American people will continue to see more than 40% of all personal income tax dollars spent on servicing the debt. Rather than having those dollars devoted to better education, defense, infrastructure, and various other services, the money evaporates into thin air as interest payments.

Not exactly the news we want as the US heads into tax season.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Santiago Pilego is the Director who leads the venture side of a company called New Founding.

In this conversation, we talk about the vibe shift that is happening in America, culture wars, backing companies defined by American ideals and positive national vision, DEI and ESG, bitcoin, and creating solutions.

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The Vibe Shift in America is Underway - Conversation with Santiago Pilego

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To investors,

Investing is an endless pursuit of learning. No matter how much you think you know, there is always something new around the corner. The world is dynamic. The future is unknown. If you pay attention and put in the work, you can find small insights about how the world works.

Many of these insights may surprise you.

Over the last few days, I have stumbled across a few of these surprising data points. I’ve compiled them in today’s letter, so we can all attempt to learn together.

First, Japan’s Nikkei 225 Index just hit a new all-time high after a 35 year bear market. I am often reminded of the phrase, “bubbles can get bigger than you think, crashes can go deeper than you think.” We may need to add a third part, which would be “bear markets can last longer than you think.”

Next, Moscow’s stock market is up 47% since the invasion of Ukraine. This appreciation comes despite the immense level of financial sanctions against Russia, along with a general vibe shift to “don’t trade with the enemy.”

On top of the stock market, Russian oil imports by foreign countries are at the same level now as they were before the Ukraine invasion. China, India, and Turkey have gladly taken extra Russian oil, while the rest of the world tries to grab the moral high ground.

Domestically, the magnificent 7 stocks (Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla) have been on an epic run. Surprisingly, the market does not appear to believe the companies are overvalued at the moment. Short interest on these 7 stocks has continued to remain suppressed, which likely is helping to drive the prices higher as well.

The magnificent 7 are not the best performing stocks over the last 30 years though. That title belongs to Monster Beverage, which is up a whopping 68,825% all time. Everyone knows energy is valuable, but it was energy drinks instead of oil or natural gas that was the best investment.

Lastly, something previously thought impossible happened yesterday. Varda, the space manufacturing company that wants to manufacture drugs in zero-gravity, successfully returned the first commercial space drugs ever manufactured in space (this photo is of the recovered drugs after the touched down in the desert).

The company has created a space manufacturing facility, launched it into orbit, manufactured the drugs, and safely returned them to the United States yesterday. It took them less than 1,200 days to accomplish all of this. I am a tiny investor and couldn’t be more excited about what will be possible if we can commercialize space for the benefit of humans on Earth.

Remember, investing is a journey of learning. Sometimes we are surprised by data and other times we get to peek into the future. I can’t believe we are all fortunate enough to live in the second best time in human history. What would be the first? Tomorrow.

Hope you all have a great day.

-Anthony Pompliano

🚨 Reader Note: Today we are hosting a webinar to explain the current state of the US housing market. The webinar will be led by ResiClub’s Lance Lambert and is full of unique data and insights.

The webinar is free to attend. You will definitely learn something about interest rates and the largest asset class in the world. If you would like to attend, please RSVP here and we will send you a calendar invite with Zoom information.

Michael Zuber is a W-2 employee who retired at the age of 45 through real estate, and created a brand called "One Rental at a Time."

In this conversation, we talk about the single family rental market, how Micheal built a life of financial security, thousands of hours of content on the internet teaching others, current market conditions, and more.

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Anthony Pompliano Shares His Latest Thoughts On Markets And Geopolitics In This Episode of New Founding

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Today’s letter is brought to you by Bitcoin Investor Day!

I am hosting the first Bitcoin Investor Day in New York City on March 22nd this year. It is an annual meeting for sophisticated Wall Street investors who are interested in bitcoin.

Speakers include Cathie Wood, Mike Novogratz, Anthony Scaramucci, Mark Yusko, Head of Digital Assets at BlackRock, Bitwise CEO, Head of Research at Fidelity & VanEck, and many more.

Tickets are only $50 and the venue is incredible. This will be one of the highest quality bitcoin conferences of the year. See you there!

To investors,

The consensus across Wall Street is that inflation has dropped and the Fed is ready to start cutting interest rates. Investors have positioned themselves to benefit from rising asset prices. The central bank is preparing to wave the victory flag. The media can’t stop writing about the elusive “soft landing.”

But what if the consensus is wrong?

This is an idea that Bianco Research founder Jim Bianco and I discussed yesterday in our recorded conversation. Neither one of us believe that interest rate hikes is the likely scenario, but it is hard to ignore that the odds are becoming higher with each passing month of new data that we receive.

According to Bianco, here is a refresher on what has occurred so far:

“On January 12th, the market was pricing in 7 interest rate cuts for all of 2024. There are only 8 Fed meetings per year, so they were saying the Fed wasn’t going to move on January 31st, which they didn’t, and then they were going to cut rates at every other meeting for the rest of the year. That was on January 12th. Now it (market prediction for the number of rate cuts) is down to 3. So we have already removed 4 rate cuts for the year and now the first rate cut is not priced in until June…the June probabilities are around 75%, but 10 days ago they were at 100%.”

This degradation of confidence on how many interest rate cuts, and how quickly they will occur, is a direct response to the concerning inflation data that has been reported for the last 2-3 months.

You can see in this chart from the BLS report of January’s inflation measurement that the month-over-month change has been accelerating for the last 3 months.

The higher that monthly inflation goes, the harder it becomes for the Fed to justify cutting interest rates. One of the worst things that could happen for the central bank is a re-acceleration of inflation right before we finally cross the finish line of the inflation fight. This would not only be devastating to Chairman Jerome Powell’s legacy, but it would also create significant damage in the US economy.

Consumers would be hurt by higher inflation and investors would be caught offsides since majority of them are prepared for asset prices to rise on the perceived incoming interest rate cuts.

So why are so few people talking about potential interest rate hikes?

Bianco highlights a little known fact — the central bank of New Zealand has been one of the leaders over the last few years in global monetary policy. He said:

“New Zealand is a developed world and its central bank, the Reserve Bank of New Zealand, has been one of the forward-looking central banks in the world. They developed inflation targeting in 1989. It took the Fed 23 years to adopt it. Maybe it wasn’t a good idea, but they have been ahead of it.

The New Zealand central bank was the first one to raise rates in early 2022…in January 2022. They were the first ones to pause in early 2023. They have been the leader.

What are they talking about in New Zealand? Inflation is not solved. We have to raise rates again. And so they are now debating when and how they are going to raise rates, and how high they are going to go, and it looks like they are going to hike rates maybe two more times to 6% sometime by summer. So the leading central bank….they are talking about raising rates again.”

This information will be shocking to many people. It was to me. But it makes sense. A small country has an easier time thinking independently than a large, globally important country because the smaller country has less scrutiny and pressure.

If inflation is not going away, and it is continuing to accelerate month-over-month at a rate close to 4% annualized, central banks would continue increasing interest rates. However, the problem now is that the Fed told the market that they were done hiking interest rates. Market participants don’t want an unreliable Federal Reserve.

They rely on the Fed to do what they said they were going to do.

The Fed violated this once already in the last four years. They told the market that the interest rates were going to stay near 0% for years. By the time the central bank began hiking interest rates at the fastest pace in history, market participants found themselves completely unprepared. Remember when regional banks were failing on a daily basis? That was a direct result of the Fed doing something other than what they had said they were going to do.

So now the Fed has backed themselves into a corner — they told the market that the interest rate hikes are done. The fight against inflation is almost won. Be prepared for multiple interest rate cuts in 2024.

It would be very unfortunate if inflation remains sticky and the Fed has to change their mind. But with each passing day, those odds are getting higher. I am not prepared yet to argue that it is likely the Fed is going to hike interest rates, but I believe the odds to be much higher than most of the market thinks.

That spells opportunity and potential disaster depending on how you look at it. Keep your eye on the inflation data and start thinking critically about how the Fed may respond if the data gets worse. It could help you see around the corner before everyone else.

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Jim Bianco is the President and Macro Strategist at Bianco Research. He also has an ETF, called the WisdomTree Bianco Fund (WTBN).

In this conversation, we talk about the pros and cons of bitcoin ETF, similarities to the gold ETF, centralized ownership of bitcoin, macro economy, federal reserve, interest rates, and more.

Listen on iTunes: Click here

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* BetOnline -  Use crypto to bet on sports, casino games, horse racing, poker and more with promo code POMP100.

* Espresso Displays - The world's thinnest touchscreen portable monitor. Expand your workspace and work from anywhere.

* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Base - Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Satoshi Nakamoto published the bitcoin whitepaper on October 31, 2008. The paper was titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” In the abstract, Nakamoto writes this as his first sentence:

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

The promise of bitcoin has been that it will replace fiat currencies for store-of-value AND medium-of-exchange. It is obvious that hundreds of millions of people are using bitcoin as a store-of-value, but the medium-of-exchange vision is becoming harder to see with each passing day.

On the store-of-value front, bitcoin is a trillion dollar asset that has approximately 80% of the circulating supply which has not moved in the last 6 months. If you expand the timeline out to 1 year, the percentage of coins being held for the long-term is approximately 70%.

Why would you sell an asset that is likely to appreciate in price in the future? You wouldn’t. This is the same reason that people hold real estate or gold. The assets appreciate as the dollar, which the asset is priced in, gets devalued.

In order for any asset to become electronic cash (translation: medium-of-exchange), it must first become a store-of-value. So bitcoin has checked that box.

The next step is to get users of bitcoin to transact with it to purchase goods and services. This happens in certain situations, but it has not become the dominant use case for bitcoin. In fact, other digital assets have become the de-facto asset for peer-to-peer transactions.

Let me explain.

It is true that the total number of transactions on bitcoin’s layer one blockchain have continued to increase over time. Today the number hovers per day between 300,000 transactions and 600,000 transactions.

This means that the transaction rate — the number of transactions per second — has also been increasing at a similar pace.

To put these numbers in context, Visa does 750+ million transactions per day and 8,750 transactions per second. Paypal does ~ 74 million transactions per day and 850 transactions per second. The Paypal comparison is probably better because it was founded within 10 years of bitcoin’s launch (1999) and has about the same number of users as bitcoin (less than 500 million people globally), yet Paypal’s transaction volume is almost 150x higher on a daily basis.

Bitcoin’s challenge was historically thought to be the slow and expensive experience to send transactions. Enter the Lightning Network. This peer-to-peer layer two allows people to send transactions directly between each other without waiting for the layer one.

But this technical improvement has not yielded the transaction volume explosion that many predicted. It is not that the technology can’t handle the transaction volume (it can handle millions of transactions per second), but rather the consumer preference is to transact using a different asset.

I have long told people not to spend their bitcoin. Many people have given me a hard time about this over the years. We don’t accept bitcoin for almost any of the products and services that we have built over the years. I don’t want people to spend a currency that is going to appreciate in the future. It makes no sense to spend bitcoin for goods and services if you can avoid it.

The majority of bitcoiners appear to agree. Not only are they holding their bitcoin and driving the circulating supply highly illiquid, but stablecoins have become the asset of choice for people in the crypto community. You can see the increasing usage every year from launch through 2022 (note: the trend continues into 2024 but I was having difficulty creating the right chart to show it):

Stablecoins are doing more than $300 billion in weekly transaction volume, which puts it on a more than $15 trillion annual transaction run-rate.

Why is this number important? Because Visa does $15 trillion in annual transaction volume. So while everyone was expecting bitcoin to become the electronic peer-to-peer cash, stablecoins were able to seize that opportunity so far.

Now you may wonder if this is just a first-world development. Maybe people in the developing world prefer bitcoin over stablecoins? Former NFL star and successful entrepreneur/investor Russell Okung tweeted over the weekend:

“Used to advocate weekly for merchants to accept Bitcoin as payment and utilize the Lightning Network, now I find myself questioning whether the Lightning Network is truly the only solution…During my time in Africa, while advocating for the Lightning Network, I faced a cold, hard realization. Despite my efforts, I found that more people were interested in dealing with USDT rather than Bitcoin. They desired USD, even if they were synthetic versions.”

Castle Island’s Nic Carter followed this commentary up with what he calls the Orange Man’s Burden:

“The mistaken belief that the global south requires bitcoin, despite their clear revealed preference for stablecoins, and privileged westerners must impose it on them == Orange Man's Burden”

Stablecoins are the winners in the peer-to-peer electronic cash competition. This does not mean that the situation will stay this way. While unlikely, bitcoin could catch up and surpass stablecoins in the future. But right now, the global market is suggesting that bitcoin is a great store-of-value in the world and stablecoins are the more popular medium-of-exchange.

This nuance is important to understand because only independent thinkers will be able to change their mind when presented with these new facts. Don’t fall into the rigidity of the bitcoin religion imposed by the loudest hardcore maximalist. Although their intentions are commendable in an effort to bring bitcoin to the world, it spells disaster when they ignore the realities of the market.

Bitcoin doesn’t need to become the most popular medium-of-exchange asset in order to drive more economic value in the future. Bitcoin is likely 10x better than gold in terms of portability, divisibility, transparency, predictability, security, etc. This should lead to at least a 2x higher market cap over a few decades, so being the digital gold would still have about 20x more upside available to bitcoin holders if that outcome comes to fruition.

Economic actors do not spend a currency that will appreciate hundreds or thousands of percent in the future. The limitations for bitcoin as a medium-of-exchange are not technical, but rather a game theory that highlights bitcoin’s future success in price could be it’s worst enemy as a spendable currency.

I’m not selling my bitcoin, but I am also not spending it. Spending bitcoin is a form of selling. So if the hardcore maximalists truly believe bitcoiners don’t sell bitcoin, we should ask why they are selling their bitcoin for goods and services? :)

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here.

Darius Dale is the Founder & CEO of 42Macro.

In this conversation, we talk about global liquidity, quantitative risk management model, bitcoin, other assets, and macro environment conditions.

Listen on iTunes: Click here

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Will Global Liquidity Push Bitcoin To All-Time Highs?

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* Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today.

* Base - Base is shaping the future of the on-chain world with near-zero gas fees and rapid transaction speeds.

* ResiClub - Your data-driven gateway to the US housing market.

* Bay Area Times - A visual newsletter explaining the latest tech & business news.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe